Samsung Electronics Co. Endures Profit Dip Amidst Semiconductor Industry Fluctuations
Samsung Electronics Co. experienced a significant 74% decrease in net income for the last quarter, marking the fourth consecutive quarter of diminishing profits. This decline occurred despite expectations of a resurgence in chip and electronics demand. The South Korean technology leader reported a loss of 2.18 trillion won from its main chip operations, a figure that exceeded analyst projections. However, the company’s financial results received a significant boost from a tax credit, resulting in a figure almost double that of analysts’ predictions.
The company reported an operating profit of 2.8 trillion won and sales of 67.8 trillion won. These figures align with preliminary data. After the earnings announcement, the company’s shares underperformed compared to the broader Kospi index and the MSCI Asia Pacific Index, experiencing a downturn of up to 1.4%. Samsung has made significant progress in its high-bandwidth memory (HBM) chip segment, which is crucial for Nvidia’s artificial intelligence accelerators. Sales increased by over 40% in the December quarter. Furthermore, the company has noticed signs of recovery in memory demand and anticipates growth in mobile shipments.
Kim Jaejune, Samsung’s executive vice president overseeing the memory business, has articulated the company’s strategy to fortify its leadership in the HBM supply sector. This move is in anticipation of generative AI technologies spurring further demand. The company’s extensive scale is poised to support the transition to an enhanced version of HBM in the latter part of the year. Samsung has also revealed a substantial investment of 53.1 trillion won in capital expenditures during the previous year, with a significant portion dedicated to semiconductors, particularly advanced nodes.
Samsung’s foundry division competes with industry leader Taiwan Semiconductor Manufacturing Co. However, Executive Vice President Jeong Gibong has indicated that the division may not see an immediate recovery this quarter. Clients are still reducing inventories to avoid oversupply. The company’s share price has declined due to its cautious approach. However, it continues to uphold its dividend payout and has committed to returning half of its free cash flow to shareholders, as outlined in its latest three-year shareholder return plan.
The recent performance of Samsung Electronics Co. has moderated the initial optimism regarding a surge in semiconductor demand, which has been partly fueled by the boom in artificial intelligence. This contrasts with the unexpected profit reported by SK Hynix, another memory chip manufacturer, earlier in the month and the optimistic forecast from TSMC, the contract chipmaking leader. These developments have contributed to a significant rally among Asian chip firms, including Samsung. Nevertheless, the sales of AI-related chips have encountered limitations, presenting a complex outlook for the industry’s recovery.
Samsung Electronics Co. has navigated a challenging period marked by a significant profit downturn for the fourth consecutive quarter. The challenges in its chip operations and foundry business, the company has experienced growth in HBM sales and is strategically preparing to leverage the burgeoning demand for AI technologies. The company’s dedication to shareholder returns remains unwavering in the face of these industry dynamics.
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